UK Services Activity Expands Moderately In September

10/4/2017 8:21 AM ET

The UK services sector growth improved from an 11-month low in September, but the pace of expansion remained moderate as subdued domestic demand acted as a drag on activity growth.

The services Purchasing Managers' Index climbed to 53.6 in September from August's 11-month low of 53.2, survey data from IHS Markit and the Chartered Institute of Procurement & Supply showed Wednesday.

The PMI reading was expected to remain stable at 53.2. Any reading above 50 indicates expansion in the sector.

Nonetheless, the pace of expansion remained weaker than seen on average in the first half of the year as incoming new work grew at the slowest rate in 13 months.

The surveys portray an economy struggling with the unwelcome combination of sluggish growth and rising prices, presenting a dilemma for policymakers, Chris Williamson, chief business economist at IHS Markit, said.

Paul Hollingsworth, a Capital Economics' economist, said the rise in September's services sector PMI will help to assuage fears that the economy is losing momentum, but it suggests that growth struggled to pick up pace in the third quarter.

While survey respondents cited a range of supportive economic fundamentals, there were reports that worries about the business outlook had acted as a growth headwind. Business confidence remained close to its weakest since the end of 2011.

While a number of firms commented on resilient confidence in terms of planned product launches and their own sales strategies, this was counterbalanced by anxiety about the wider economic outlook and the prospect of continued political uncertainty ahead.

Despite softer new business growth and fragile business confidence, latest data indicated a sustained rise in service sector employment. The rate of job creation eased only marginally from August's 19-month high.

On the price front, the survey showed that service providers remained under pressure from sharply rising operating expenses, which contributed to the fastest rate of prices charged inflation since April.

Input price inflation intensified to a 7-month high and remained among the strongest seen since early-2011. As a result, output prices registered a solid increase in September.